Navigant Research Blog

Alaska Builds a Microgrid Future

— April 15, 2015

Alaska was in the midst of a heat wave when I arrived there in early March, with temperatures hovering around the freezing mark, and reaching 40 °F  the day I left. The lack of snow forced the annual Iditarod dog sled race to a new route farther north, a sign many locals attributed to global climate change.

I went to Alaska because the state is ground zero for microgrids, with more deployed here than any other state in the United States, with some nearly 100% supplied with renewable energy. Alaska’s often harsh environment means that microgrid performance can literally be a life-or-death situation. When one such system failed more than a decade ago in Kotzebue, a city with a population of 3,700 and located 30 miles above the Arctic Circle, the entire water and wastewater system froze, and it took months to bring water back online.

Call to Arms

Held in Anchorage, the Islanded Grid Wind Power Conference demonstrated that Alaska can show the rest of the world how to create more resilient and sustainable power systems in the face of immense logistical challenges. While the rest of the world seems to be turning to solar power, wind is still king in Alaska, where towns like Kotzebue only have 35 days during summer where the sun rises above the horizon.

Most microgrids in Alaska are run by utilities—rural cooperatives, municipal utilities, or Native Alaska village corporations. Some of these entities, especially tiny villages on remote islands, have limited operational capacity, so technology choices must be wise and easily reparable. That’s why some companies, such as Intelligent Energy Systems, often rely upon older turbines that can be fixed the old fashioned way: with a wrench.

Beyond Diesel

Other companies, such as TDX Power, an Alaskan Native corporation created by individuals whose ancestors were the slaves of Russian fur trappers, are building innovative wind heating systems that validate the thermal energy benefits microgrids bring to the table. They’re also investigating new business models, given that Alaska is now about $4 billion in the red due to declining oil prices. Ironically enough, this shortfall is limiting future financial support for renewable energy development, forcing developers to find creative microgrid financing solutions.

Perhaps the most interesting company I saw was Innovus Power of Fremont, California. Innovus offers variable-speed diesel generators that come embedded with what is, in essence, a microgrid controller capable of supporting renewable penetration levels of up to 100%. Leveraging power converter innovation from Northern Power, the company says its gensets can eliminate the need for curtailment or expensive energy storage, and can serve as backbones for microgrids that combine dispatchable power and renewable integration capabilities.

Governor Bill Walker pointed out that while Alaska has more energy resources than any other U.S. state, its power prices are the highest. Microgrids integrating renewable energy are a key part of the future strategy to change that situation.

 

Mobile Utility Solutions Move Beyond Field Crews

— April 15, 2015

The market for utility IT systems is large and growing. Navigant Research estimates that nearly $9.5 billion will be spent globally this year on everything from meter data management (MDM) and customer information systems (CISs) to advanced distribution management systems (ADMSs), outage management systems (OMSs), and new analytics solutions. (Our forthcoming report, Smart Grid IT Systems, will cover these technologies in detail.)

Mobility is a key part of this expansion. Utilities today want their workers to have access to systems data wherever they are. While this has long been true for mobile workforce management systems (MWMSs), mobility requirements are now extending to a multitude of systems.

As IT systems are increasingly integrated with each other and MWMSs, field crews can not only communicate instantly with their peers over mobile devices, but also upload critical, accurate data to central office systems from the field. Photos can be taken and uploaded in real-time, providing global positioning system (GPS) coordinates of a given grid device as well as visual information and nameplate data. Asset management systems (AMSs) and geographic information systems (GISs) have never before had the benefit of such accurate and granular data.

In Real Time

Safety measures can also be enforced by mobile systems. IBM and Apple have announced an iPhone solution that (among other things) can require a worker to view safety guidelines before performing certain tasks. The app can also ensure that the worker has appropriate, up-to-date certifications before beginning the job. It can find subject matter experts or managers in the geographic vicinity if the onsite crew doesn’t have the needed expertise.

On the customer side of the equation, utilities are recognizing the need for greater, more frequent engagement. Mobile applications tied in with MDM systems and CISs allow customers to easily check their mobile device for information on usage and bills or to participate in demand response events, giving them more visibility and control over their energy use.

Utilities are also adding social media accounts and using them to interact with consumers—a field worker can post to Facebook, for example, to advise customers when an outage is expected to be over—and keep posts up-to-date in real time readily from the field. The connected employee and real-time system access are revolutionary advances in utility IT; the possibilities for utilities to gain real worker and ratepayer efficiencies are endless.

Mobility at a Price

These new possibilities don’t come cheap, though. In addition to mobile device and communications costs, the integration expenses for utilities that upgrade one or several systems in order to achieve these benefits can be high. In a highly competitive market, the prices for utility software solutions generally are holding steady, even as functionality grows. But the number of system interfaces and the complexity of integration are increasing, as well. Although smaller utilities may be challenged to make these upgrades, in the long run, mobile access will be as common a tool for utility workers—including those in the office—as it is today for many other industries. This mobility is a key aspect in enabling the energy cloud, which promises to connect stakeholders in each link of the energy value chain.

 

Distributed Energy Storage, Low-Cost Financing a Powerful Combo

— April 14, 2015

Leases and third-party ownership models have helped the global solar PV market grow dramatically in recent years, and now they’re spreading to the energy storage market. ViZn Energy Systems recently announced that it will offer a similar financing program from LFC Capital, Inc. for ViZn’s distributed energy storage systems. While several companies, including CODA Energy, Stem, and Green Charge Networks, offer leases that feature a shared savings model on energy storage systems for commercial and industrial (C&I) customers in the United States, ViZn’s offering will be the first to target larger facilities (system capacities of 80–500 kWh of storage) with a different leasing model that aims to be more beneficial to customers.

ViZn takes responsibility for the system performance and the risks associated with its relatively new zinc/iron flow battery technology. This move demonstrates full trust in the system’s ability to greatly reduce a customer’s energy bills. The leasing program, available for C&I projects combining ViZn’s energy storage with solar PV and/or cogeneration energy systems, is designed to eliminate construction-period financing costs and simplify the installation process. In contrast to complex and lengthy power purchase agreements (PPAs), LFC’s 3-page lease will be familiar to customers accustomed to leasing general business assets and provide them with a predictable low-cost of ownership in 6 or 7 years.

Fees and Incentives

The primary benefit from using ViZn’s system will be ongoing cost savings from reduced demand charges and energy management expenses. Pairing storage with onsite solar PV can improve the economics of both systems by minimizing the consumption of grid power during peak demand periods, as well as hedging against any future net metering restrictions or export limitations. ViZn has also designed its systems to participate in ancillary service markets by aggregating its fleet of distributed storage systems to act as a single, dispatchable resource.

While the leasing program is available nationwide, ViZn anticipates most of the uptake to come from states with high electric rates and strong local incentive programs, such as California, Texas, and several states in the Northeast. The leasing program is not available for use outside the United States at this time. However, with prototype systems already running in the United States and Europe, the company is well-positioned to move into new markets in the coming years.

Innovative financing solutions can be an important component driving an emerging market to further growth. It will be interesting to see if this business model is adopted by other players in the storage industry, and what impact it may have on the market.

 

Energy Storage Diversity Highlights Regional Differences

— April 14, 2015

As the global energy storage industry continues to take shape, clear differences between regions are emerging. These differences reflect of a number of factors in each area, including electricity market structure, local manufacturing expertise, industrial and energy policies, and geographic characteristics. These factors have significant influence on the diversity of energy storage technologies being deployed in each region. Navigant Research’s Energy Storage Tracker 1Q15 tracks all storage projects around the world, allowing for deep insights into the impacts that market structure and policies have on each region’s market and technological diversity.  

Map of Energy Storage Technology Diversity (Number of Deployed Technologies), World Markets: 1Q 2015

North America is the most technologically diverse region for energy storage in the world, with 19 different technologies (20 including pumped storage) currently installed. This is a result of agencies and favorable policies in North America that are focused on encouraging innovation, such as the United States’ Advanced Research Projects Agency-Energy (ARPA-E) program, as well as various state policies. The U.S. federal government supports technological diversity through the Department of Energy (DOE) Loan Programs Office, which provides secure, competitive financing for innovative clean energy projects that utilize a new or significantly improved technology. As a result of these factors, lithium-ion (Li-ion)-based storage systems (the most popular globally) only account for 12% of deployed systems in North America and 13% of the regional pipeline, which includes projects utilizing 15 different technologies.

Local Specialties

Due to local manufacturing and engineering specialties, batteries are the primary choice for energy storage in Asia Pacific, making the region less technologically diverse than North America or Western Europe. Regulatory policies tend to favor domestic technologies and manufacturers. Notably, Japanese sodium sulfur (NaS) battery manufacturer NGK Insulators has benefited from close relationships with many utilities, resulting in an installed base of over 360 MW in the region. Given recent safety concerns regarding NaS systems and the opening of new markets, domestically produced Li-ion systems now lead the Asia-Pacific region. This is also a result of the region’s grid resiliency efforts (particularly in Japan), which encourage the adoption of smaller distributed storage systems, an ideal application for Li-ion systems. Overall, Li-ion-based systems represent 76.6% of the pipeline for the Asia Pacific region.

The technological diversity of Europe’s energy storage industry falls in between North America and Asia Pacific. Europe has a much greater diversity of market rules and policies compared with other regions. In general, European policies favor innovative/foreign technologies more than in Asia, and as a result there are eight different technologies in the European project pipeline.

Regional View

Germany, the leading market in Europe, has policies and market conditions (e.g, a high penetration of distributed solar, net metering restrictions) that favor distributed energy storage. As Li-ion systems are ideally suited for distributed installations, those batteries have begun to lead the German market despite a relatively diverse base of deployed technologies.

The Energy Storage Tracker explores the global energy storage landscape by tracking projects deployed and planned around the world. Navigant’s project database allows for in-depth analysis of regional markets to understand the impact of policy on technological diversity. Technological diversity can be a key indicator of the overall health of a market and the opportunities for innovative or foreign companies to compete.

 

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